Have three words ever been so heavily litigated as 'sudden and accidental'? The American Reinsurance Company's recent 'Review of environmental coverage case law' describes 107 cases in various states in which the courts have ruled on the meaning of these three words.

On 1 July 1993 the ninth US state supreme court to do so gave its view, in the case of Dimmitt Chevrolet Inc v Southeastern Fidelity Insurance Corporation.

The previous eight supreme courts had been split, four in favour of one meaning and four in favour of another.

In Dimmitt Chevrolet the seven judges of the Florida S upreme Court split 4:3.

What is it in these three simple words that has prompted such judicial disagreement?All these cases have involved claims against insurers by companies facing liabilities under US environmental laws - generally the cost of clean-up measures under the Superfund regime.

The companies are claiming under their comprehensive general liability (CGL) policies, the equivalent of public liability policies in the UK.

Between 1970 and 1984 the standard wording for CGL policies contained an exclusion for damage caused by pollution, except for pollution resulting from 'sudden and accidental' events.

When, in the early 1980s, companies began to find themselves facing very large claims for cleaning up pollution damage, all at once it became very important to decide what 'sudden and accidental' meant.In most cases the pollution is the result of normal industrial operations over a period of years.

In Dimmitt Chevrolet the pollution was caused by leaks from storage ponds in which waste oil sludge had been dumped, occasional spills of oil, etc.

The pollution resulting from the leaking ponds, in particular, could be described as resulting from an accidental event: while the dumping was intended, the leaks were not.

But surely it could not be described as sudden? Nevertheless, four of the nine state supreme courts to have ruled on the issue so far have decided that such pollution is sudden and accidental - to the distress of the insurance industry, which feels, quite reasonably, that this is just the sort of gradual pollution which the provision was intended to exclude.The Dimmitt Chevrolet case is interesting for three reasons.

First, it tips the overall balance of supreme court decisions 5:4 in favour of the insurance companies.Secondly, the arguments of the dissenters are unexpectedly cogent.

Judge Overton argued that 'sudden' does not necessarily, or even primarily, have a temporal meaning - equivalent to 'immediate' or 'instantaneous'.

Its primary meaning is 'unexpected' - as in a sudden turn in the road, or sudden death - and that accurately describes the leaks of oil from the ponds.

Once one accepts that its meaning is ambiguous, both the drafting history of the provision and the contra-preferentem rule mean that the loss should be covered by the policy.

(The majority's counter-argument was that to read 'sudden' as meaning only 'unexpected' adds nothing to 'accidental'; while sudden can connote unexpected, in the present phrase it also carries a temporal meaning of abruptness or brevity - that is, not gradual.)Thirdly, the case is interesting for the judgment of Judge Grimes, which swung the case in favour of the insurer.

It is admirably brief, and neatly encapsulates the conflict between common-sense interpretation and 'social policy' which has underlain the decisions so far:'I originally concurred with the position of the dissenters in this case.

I have now become convinced that I relied too much on what was said to be the drafting history of the pollution exclusion clause and perhaps subconsciously upon the "social premise" that I would rather have insurance companies cover these losses rather than parties such as Dimmitt who did not actually cause the pollution damage.

In so doing, I departed from the basic rule of interpretation that language should be given its plain and ordinary meaning.

Try as I will, I cannot wrench the words "sudden and accidental" to mean "gradual and accidental", which must be done in order to provide coverage in this case.' And 300 insurers worldwide could scarce forbear to cheer.So , it was a helpful decision for insurers in the USA.

How far do similar questions arise in the UK, and what are the answers likely to be?In the UK, environmental liabilities fall into a number of categories:1.

Fines under statute may be considerable.

Thus, in 1990, Shell was fined £1 million under the Water Act 1989 (now the Water Resources Act 1991) for allowing an oil spillage into the River Mersey.2.

Clean-up costs have been the trigger for the US litigation mentioned above.

Since 1980, the Environmental Protection Agency has had the power to clean up a contaminated site.

It can then recover the cost from anyone who has ever owned, used or managed the site.

The clean-up costs may run into tens of millions of dollars, and the legal costs incurred in the proceedings between the agency and all the potentially responsible parties may be as much again.The UK authorities now have increased powers to order a polluter to pay for the cost of cleaning up pollution, under provisions such as s.59 of the Environmental Protection Act 1990.

And, when it finally comes into force (still postponed pending a decision on the contaminative uses register), s.61 of the Environmental Protection Act may result in an owner of land having to clean up its and its neighbour's land, or pay the local authority's costs in doing so, whether it was the polluter or not.3.

Third party claims: for example, actions for private or statutory nuisance, for trespass, under Rylands v Fletcher or under the COSHH Regulations 1988.

The European Commission's green paper raises the prospect of wider strict liability for environmental damage.In the UK, there are two types of policies covering environmental risks: public liability (PL) policies and environmental impairment liability (EIL) policies.PL policies cover liabilities of the insured to third parties.

Like CGL policies in the USA, for many years they were written with no thought of environmental liabilities.

Understandably, UK insurers took much longer than their US counterparts to wake up to the danger such liabilities pose.

Whereas US insurers excluded all claims arising from government clean-up action from 1984 onwards, before April 1991 only a few UK policies limited cover of pollution damage at all, by 'sudden and accidental' wording on the US model.

Only in that month did such an exclusion become common (indeed, universal) in new policies, when insurers adopted the ABI's recommended pollution exclusion.

That excludes all pollution damage 'other than that caused by a sudden identifiable unintended and unexpected incident which takes place in its entirety at a specific time and place during the period of insurance.

All pollution or contamination which arises out of one incident shall be deemed to have occurred at the time such incident takes place.'New policies may now cover gradual pollution by using the SEPTIC endorsement, also promulgated by the ABI.

However, very few policies have as yet been written on this basis.Again like CGL policies, PL policies are written on an occurrence basis - they respond if the event causing the damage occurred within the period of cover, whenever the claim is made.

Environmental damage may materialise long after the event which caused it - oil spilled near fuel pumps may appear in the groundwater a mile away 20 years later.

Hence the role of the insurance archaeologist: the PL policy in force in 1973 is likely to be wide enough to cover the liability, whereas a present day policy will not be.This is the sort of situation which has resulted in the US litigation.

The re, insureds facing clean-up liabilities have often succeeded in recovering from the insurers who wrote long dead CGL policies.

In the UK, too, the first advice to a client facing environmental liabilities must be to dig out his or her old insurance policies.

When comparing the wording of the policy with the circumstances of the claim, the following issues are likely to be crucial:1.

'Sudden'.

All new, and some pre-1991, UK PL policies limit cover of pollution damage to 'sudden' events.

The Dimmitt Chevrolet case illustrates the doubt which in the US even appellate courts, well away from the influence of juries, have felt about what this means.

In the UK, regular drips from a diesel tank, or leaching from a landfill, will certainly not be 'sudden'.

But infrequent overflows from a storage lagoon could be.2.

'Accidental'.

In the USA, 'accidental' has been defined as meaning 'unintended and unexpected', and this latter phrase has been used in the ABI's 1991 endorsement.

It is the event which causes the loss that matters - if drums of chemicals are dumped in a landfill and subsequently leak, the issue is whether the leaking, not the dumping, was intended or expected.

In deciding this, an English court is likely to apply an objective test.

It will deny cover if, at the time the assured dumped the drums, it should have expected them to leak.3.

Fines.

A policy will not cover the insured against criminal penalties (including private proceedings for statutory nuisance).4.

Claims.

In this context, perhaps the most significant limit on the cover provided by PL policies is that they only cover third party claims.

The current Lloyd's standard PL policy covers 'such sums as the assured shall become legally liable to pay in respect of claims made against the assured arising from...injury...to persons or damage to property'.

Policy wordings differ: some refer to damages, or payments by way of compensation.

In the environmental context, some situations are clearly covered or not covered by such an indemnity.

For example,-- My diesel tank leaks on to my neighbour's land and he sues me for trespass - clearly covered.-- I dig up and treat the contaminated soil on my own land - clearly not covered.But other situations are less clear.-- A local authority takes action under s.61 of the Environmental Protection Act.

Clearly if the authority tells me to clean up my land, the cost is not covered.

But(a) if the authority cleans up my land and seeks to recover the cost from me (s.61(8)), is that covered?(b) what if the local authority cleans up my neighbour's land which has been polluted by leaks from my land?In the USA, CGL policies typically cover 'sums which the insured shall become legally obligated to pay as damages'.

Many courts have held clean-up costs incurred under government compulsion to be damages, whether the insured or the government does the work and whether the land is the insured's or not.

In the UK the usual indemnity is wider, and both (a) and (b) could be 'sums which the assured is liable to pay in respect of claims against him arising from damage to property' (though they would probably not be damages).

But PL policies exclude liability resulting from damage to the insured's own property, which excludes (a).-- My neighbour sues me for nuisance, caused by fumes from my factory.

Any damages he obtains for private nuisance are covered.

If he brings proceedings for statutory nuisance, any fine is not covered (see 3 above).

In either case, if he also obtains an injunction requiring me to install expensive scrubbing equipme nt, the cost is not covered.-- I sell my land to a purchaser, warranting it free from contamination.

He sues me for breach of warranty, claiming the clean-up cost.

If the property damage which resulted in the claim occurred when I owned the land, it would be excluded as damage to the insured's own land.5.

Occurrence.

PL policies indemnify the insured against liability arising from damage 'caused by any accident occurring during the period of the insurance'.

This may benefit the insured by allowing it to claim on a long-dead policy.

But it also means that it can only claim if it can show that the (possibly long distant) event which caused the damage occurred during a period of cover, and which.

This may be easy where a policy has been renewed year after year by the same insurer.

Where insurers, or the terms of the policy, have changed over time, it may be impossible for an insured to prove in which policy year an underground pipe leaked, and therefore which insurer is liable.In the USA, this difficulty was encountered first in asbestosis cases.

The theories developed in those cases to decide when the event triggering a claim occurred have been extended to other environmental claims.

Often discoverability of damage is the test.

In the UK, no such helpful theories are available to insureds.

Kelly v Norwich Fire Insurance Ltd [1989] 1 WLR 139 stated firmly that if an insured is to claim under an occurrence-based policy, he or she must show that the event which caused the damage, not the damage itself, occurred during the period of cover.EIL policies have been available (after unhappy experiences in the 1970s) only since 1989.

They have always been written with environmental liabilities expressly in mind and at a price and subject to safeguards which limit their appeal to all but the most cautious insureds.EIL policies' main features are:-- they cover gradual pollution (and some, such as the AIU policy, also cover sudden pollution);-- they are written on a claims-made basis, but may be (for example the CEILIF scheme) subject to a condition that the event causing the damage must also have occurred after the policy commenced;-- they are limited to third party liabilities, exclude the insured's own land (and therefore clean up of it) and exclude pollution which the insured should have expected to occur; and-- cover is always specific to individual sites, and each must be surveyed by an approved surveyor before the cover is accepted.So there are no bargains available in the EIL market and very few UK policies have been written.

But in the USA, where EIL policies have matured and both insurers and insureds now understand the basis of cover, the market is now expanding.

Once UK insureds stop looking at environmental insurance policies as an unlooked-for shield against costs unimagined at the time they were purchased, but rather as another part of a prudent risk-avoidance programme, the same may begin to be true here